Tories revolt over reversal on tax break for marriage

David Willetts, the shadow social security secretary, and Michael Portillo, the shadow chancellor, are finalising a proposal to give a tax incentive to married parents with young children, rather than to all married couples. This would allow a spouse who does not work to transfer their personal tax allowance to the working partner.

The proposal has angered traditionalists in the Conservative Party who want to see the tax break go to all married couples. A shadow cabinet member said: "It would be surprising to say the least if we went down that road because William has made a virtue of supporting marriage."

However, members of the policy team working on the proposal believe that offering a transferable tax allowance specifically to married parents would be more effective. They argue that eligible couples would get a larger sum than they would if all married couples received the money.

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Senior Tories believe that the policy would appeal to women who want to stay at home with their children by removing the disincentive for them to give up work. It would benefit single-income families, likely to be among the poorest households.

At present, the first £4,500 of earnings is tax free. Allowing a wife who stays at home with children to transfer her allowance would mean her husband could earn £9,000 before tax. Mr Portillo is concerned about the cost of restoring the allowance across the board. The Treasury estimates that it would cost £4.25 billion, but it would only cost £1 billion to support couples with children.

Mr Hague has not seen the final details and no decisions have been made. Mr Willetts said: "We are determined to bring back the recognition of marriage in the tax system. There are a number of ways we are studying. But the shadow cabinet is united in its determination to reduce the tax burden on families."

The Tories are also considering a benefit for cohabiting or single parents. They have pledged to consult on bringing back a version of the additional person's allowance, equivalent to the married couples' allowance. A recent survey found that almost half the Tory party wanted the married couple's allowance to be available to unmarried couples.

Mr Brown replaced the allowance, worth £197 last year, with a children's tax credit. A Labour spokesman said: "They had a tax guarantee and they dropped it. They said they would bring back a married couples allowance and they have dropped that. People will conclude that they cannot be trusted."